Joanna Ripard

Agribank to launch first product on February 4

Agribank, a new, Malta-based lender targeting agricultural and rural businesses in the UK, will launch its first product through British comparison websites on February 4, according to chief executive Roderick Psaila.

The bank plans deposit opportunities in sterling for Maltese customers

The bank, headquartered at Skyparks Business Centre in Gudja, was licensed to provide banking services by the Malta Financial Services Authority last year, and granted a passport to conduct banking services in the UK by the Financial Services Authority.

Agribank will match its sterling-denominated secure lending book with sterling-denominated fixed-term funding products. Its mission is to offer advantageous terms to UK agribusinesses seeking financing for machinery and equipment.

On the other hand, its offering to depositors is designed to be uncomplicated and will consist solely of fixed-rate deposit products with three- to five-year terms. They are referred to as bonds in the UK.

In the short term, the bank plans to offer similar deposit opportunities in sterling for Maltese customers. Further along, its portfolio will include financing options for green energy projects.

“The business model is very straightforward,” Mr Psaila told The Sunday Times. “Lending products to farmers in the UK sit under assets. Funding through deposit instruments sit under liabilities.

“The customer base will be built by tapping the potential of more than 6,000 direct relationships fostered by our founders in the UK over many years.”

Mr Psaila added that most of the UK’s high street banks have chosen to close operations targeting niches such as agriculture to concentrate on mainstream business.

Agribank’s model can be likened to private banking – it is the bank’s promoters who approach the customers, not the other way round, primarily as it takes advantage of this business environment.

Agribank is the brainchild of Britons Frank Sekula and Matthew Smart, both of whom have extensive banking experience in the UK and share a background in farming through their own families’ businesses. Mr Sekula, a former Barclays banker, is Agribank’s chairman.

Mr Smart, who is an advisor to Agribank’s board, has previously worked with BNP Paribas, and is the founder and majority shareholder of Eastern Counties Finance (ECF), a leading UK agriculture finance broker. The broker has originated more than £400 million (€470m) in agricultural finance in the past 12 years and boasts industry-leading credit statistics.

The executive team led by Mr Psaila, formerly of the Central Bank of Malta, includes chief financial officer Paul Grech, who has worked with KPMG. Agribank is the fourth bank Mr Grech has helped launch.

Non-executive directors include former European Commissioner and Foreign Minister Joe Borg and Victor Rizzo Giusti, who brings 35 years’ experience in financial services to the role.

“Most of our deposits, about 90 per cent, will come from the UK through comparison websites,” Mr Psaila continued. “Our strategy is to operate a low-risk model. We will not engage in risks – we are not going to borrow to lend. Without the proper funding, we will not grant loans. We are not under pressure to grow the business rapidly and our asset side is very remunerative.

“Our balance sheet is in sterling so we do not run currency risk or interest rate risk. Every transaction is in sterling and rates are fixed. There is no maturity risk either – hire purchase and leases have terms of three, four or five years. The bank will receive deposits over terms of the same duration.”

The chief executive explained that in Eastern Counties Finance’s experience, default in UK agribusiness over the past 12 years averaged at 0.3 per cent – less than the default rate on Maltese mortgages. ECF has also experienced zero per cent ‘loss given default’ – the funds lost by banks or institutions when borrowers default.

Significantly, Agribank expects 98 per cent of business to be rolled over, thanks to a comprehensive customer relationship management programme. UK farmers are incentivised to innovate and upgrade their assets through government subsidies and European grants.

Agribank’s portal will go live next Sunday before the bank is formally launched in the UK on March 6 and in Malta on March 18.

Mr Psaila added that Agribank envisages organic growth through a lean structure. Currently operating with a team of six, it intends to recruit three more professionals in the first quarter this year. In three years, it hopes to have a team of 20 on board.

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